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Last Updated : Oct 17, 2019 11:19 AM IST | Source: Moneycontrol.com

Eicher Motors jumps 4% after UBS upgrades to buy

UBS said it has raised the target PE multiple to 23x one-year forward, a 25 percent discount to the five-year average.

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Shares of Eicher Motors, the Royal Enfield maker, rallied 4 percent intraday on October 17 after global brokerage UBS upgraded its rating on the stock to buy from sell and also raised target price to Rs 23,000, citing likely volume growth in second half of this financial year.

The stock rallied 20 percent in last one month. It was quoting at Rs 19,974.75, up Rs 738.20, or 3.84 percent on the BSE at 1058 hours IST.

The de-rating and downgrade cycle is coming to an end and there is a high conviction of sequential volume growth for Royal Enfield in second half of FY20, said the global research house.

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With limited price increases from BS-VI, UBS expects volume growth to turn positive in FY21 on a major product refresh and new model launches.

EBITDA margin concerns due to the launch of lower-priced variants are overdone and the re-rating, driven by potential volume recovery, is not priced in, it feels.

UBS said it has raised the target PE multiple to 23x one-year forward, a 25 percent discount to the five-year average.

Not only Eicher Motors but also entire auto sector showed subdued growth for last several quarters due to economic slowdown, demand concerns and pollution norms which already impacted volume growth of every manufacturer.

The Nifty Auto index fell more than 35 percent and many stocks corrected 30-50 percent from their highs before government announced several measures including 10 percent cut in corporate tax rate cut.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Oct 17, 2019 11:19 am
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